Rent caps, which set limits on permissible rent charges or cap annual rent increases during tenancies, have been adopted by many cities as a way of curbing rising rents. But do rent caps actually work? Do they keep city rents affordable? Or are they part of the problem?
No, rent caps are not a good ideaShow moreShow less
Rent caps fail at their basic function of keeping rents affordable.
Imagine a scenario where a family of four lives in a four-bedroom apartment for a decade. Then the two oldest children leave home and move into apartments of their own. The parents, not wanting to lose their discounted rent, opt to stay in the four-bedroom apartment. This is what is known as renter mismatch.
Rent controls lead to a misallocation of apartments. Parents with empty nests are likely to stay in large properties, while young families entering the rental markets are forced to cram into studios.
When rents remain below market rates, those with access to the lower rates (existing renters) will overconsume. 
[P1] Rent caps incentivize remaining in the same property, even if the number of occupants has decreased.
[P2] This leads to tenants holding onto properties with more space than they need.
[P3] This creates a housing mismatch, leading to inefficient rental distribution, disadvantaging expanding families.